This article discusses
how despite the Fed’s policies, the unemployment claims in the United States
have fallen to their lowest level in the last 5 months. The Fed is continuing to
use monetary policy in an attempt of decreasing inflation. They are increasing
interest rates and showing no signs of slowing down soon. Normally this would lead
to employers cutting back on hiring, however, due to the current labor market
situation economists are seeing an increasing trend of companies hoarding
labor. They mention the current strength of the labor market despite an economy
that is struggling. Continuing jobless claims are dropping consistently, by
about 65,000 in the period between August and September surveys, while the unemployment
rose from 3.5% to 3.7% in August.
After
emphasizing the strength of the tight labor market, the article discusses the current
struggles facing the economy. First of all, they mention the Thursday release of
a report from the Commerce Department where the gross domestic product decreased
at an unrevised 0.6% annualized rate in the second quarter. Further details
mentioned are that the consumer spending portion of GDP is better off than what
was previously thought, however, they state that corporate profits and wages were
revised to be lower than initially expected. Due to this GDI was corrected to
an increase of 0.1% rather than the previous estimation of 1.4%. The article
further compares GDP and GDI, mentioning the revisions in data and the economic
recovery since Covid-19.
Finally,
the article references the business inventory troubles of recent times, stating
that now companies have larger inventories than they originally thought or
intended they would. In most cases, inventory is paid for with borrowed money,
and having larger inventories makes them increasingly sensitive to the Fed’s
policies. This can create issues for the company and the economy as companies
will be looking to cut back on inventory.
Hello Vincent! I would like to comment on your last paragraph about large inventories. I have been analyzing Scotts miracle gro a company that is typically found in the gardening section at home depot. Scotts miracle gro found themselves in large amounts of inventory in 2021 and continued into 2022. Due to the pandemic many Americans devoted most of their time on improving their home lives, and in turn consumption on household increased. However, we are now seeing the effects of post covid era. Scotts Miracle gro did really well in 2020 and some into 2021 but now they are doing very poorly. Scotts anticipated record growth coming into 2022 based on how well they did during the pandemic. However, they are now doing really poorly and it all stems from their large increase in inventory capacity that is now not being sold because there is a large decrease in demand. I hope you learned something from this comment!
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